WASHINGTON, DC—CMBS is back. Almost. Experts speaking at day twoof the CRE Finance Council’s Annual Meeting this week said that thesecuritization industry is becoming more of a factor in commercialreal estate, from both a lending and an investment standpoint, butthere have been some shifts in the trends.

On the lending side, said Wells Fargo Securities director SteveKraljic, average loan sizes are starting to shrink. Last year, atypical CMBS loan was $28 million; that figure has dropped to about$19.5 million this year. “That probably makes some sense sincebalance sheet lenders have moved into the large loan size marketand taken some of the business away,” Kraljic noted. UnderwrittenLTV, meanwhile, is up by just one percentage point over the year to63%, though leverage is getting pushed a bit more in today’s deals,likely due to pricing and competition. “Investors may have to go abit lower in the stack to get yield,” he added, but where exactlyit will be found—i.e., mezz, construction, etc.—has not yet beendetermined.

Right now, AAAs make up as much as 80% of the capital stack.From a money manager’s perspective, said BlackRock director SamirLakhani, CMBS is interesting these days because there’s both legacyproduct and new issuances. The bulk of product that’s tradingtoday, about 80%, is legacy product. “The market is bifurcated,” hesaid. “There’s the high-quality, carry portion at the front-end ofthe curve, and then there’s the riskier product located furtherdown the stack. “We’ve actually seen the relative value creep down,and competition decrease, as you go down the stack.”